With the ABC of bookkeeping we want to make our readers understand different topics of the bookkeeping. Today’s topic is:
Accounting Ledgers: General/nominal ledger, Customer and supplier ledgers.
The business transactions of a company are entered into different books according to the principle of double-entry bookkeeping. Due to today’s digitization and computer processing, such books or ledgers as they are also referred to no longer have to be held physically and the business transactions are automatically entered in the general, or as it’s also referred to, nominal ledger, customer and supplier ledgers. However, it definitely helps to know the use of these books in order to get a better understanding of the accounting within your company.
In the general register (also referred to as nominal), all business transactions of a company are entered in chronological order; starting with the opening balances, followed by the current bookings based on the supporting documents and completed by the closing balances. Thus, each business transaction is assigned a sequential number, document number, date, the addressed accounts, amount and posting text.
The General ledger consists of all entries, journals, sales and purchase invoices and the corresponding payments. Whereas, the Customer and Supplier ledgers will only consist of their relevant entries. The general ledger is also used to create the balance sheet and profit and loss account reports. The profit or loss is determined by certain account codes within your General Ledger and the balance sheet will take into account all of the accounts within your General Ledger, as it’s the balance sheet accounts that also contain the historical accounting of the company along with any retained profit from previous years, whereas the profit and loss account relates to the current trading year.
The Customers ledgers consist of all transactions relating to each and every customer so, all invoices raised and paid from day one. The Open entries for each customer will show the invoices that have yet to be paid or yet to matched with either payments of credit notes.
When a customer invoice is processed the ledgers are reflected in the following way, the customer ledger reflects the invoice and the payment made and in the general ledger the entries are broken down, entering the sales and vat elements and the payment to the bank and the customer ledger clearing the debt:
The Supplier ledgers consist of all transactions relating to each and every Supplier so, all invoices raised and paid for from day one. The Open entries for each Supplier will show the invoices that have yet to be paid or yet to matched with either payments of credit notes.
Likewise when a supplier invoice is processed the ledgers are reflected in the following way, the supplier ledger reflects the invoice and the payment made and in the general ledger the entries are broken down, entering the sales and vat elements and the payment to the bank and the supplier ledger clearing the amount:
Do you have any questions about accounting? Feel free to visit our accounting Dictionary, our online help, or contact our support staff directly.
All of these entries are automatically maintained by the cloud application Reviso when you create a booking, try it out and see for yourself!